Learning to Match the Beat of the ‘New World Man’ Market

On Monday, the Dow Jones Industrial Average tumbled 1,175 points, its biggest one-day point decline in history. And though the session saw “only” a 4.60% drop, putting it far down the list of biggest one-day percentage declines, the rapid descent was enough to fill even the most intrepid investor with a sense of dread.

Monday’s Dow decline was compounded by the fact that on Friday, the Dow plunged 666 points, or a 2.54% drop. Yet what was even scarier for strident bulls, cautious bulls and really anyone who owns stocks, is what happened on Tuesday morning.

That day, markets opened with a serious plunge that turned the fear dial all the way up, so much so that in the first hour of trade I suspected we could be at the precipice of a full-blown correction… and possibly even knocking at the door of a bear market.

But then, things changed.

After gyrating wildly throughout Tuesday trade, the Industrial Average closed 567 points higher, or 2.33%. That move included an incredibly wild 1,167.5-point swing during the session.

When asked about what I thought of this hyper volatility by a colleague, my first thought was that we’re living in a “new world” where computer algorithm trading, a.k.a. “algos,” are ginning up the rapid rise and fall of markets.

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